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Forum Home  →  Discussion  →  Universal credit administration  →  Thread

recovery of tax credit overpayments from uc wards

stevenmcavoy
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Welfare rights officer - Enable Scotland

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this may be a simple question but its one of those ones ive got myself confused over.

what exactly is the process supposed to be here?  ive had a read at the cpag handbook which appears to suggest at points that tax credit overpayments can only be recovered in year.  so the way this can be read is that it would only hit those who get tc, claim uc and there is an overlap but i seem to remember issues with old debts appearing on here.

does anyone have a clear bit of guidance on this?

i know there have been issues recovering short term advances where the dwp appear to have been making it up, is this the same?

Andrew Dutton
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I too would be grateful for more discussion on this.

What should happen when a TC overpayment has not been notified to a claimant and just becomes a UC deduction?

What happens when the claimant has disputed the overpayment, should UC collection action be halted?

I have a case where TC overpayments from as far back as 2005 were notified (for the first time) to the claimant on migration to UC,  these have been disputed by the claimant, she is still subject to deductions from UC and the DWP’s only suggestion is to negotiate with Debt Management.

On a previous thread, Past Caring said:

‘It is reg. 12 of the UC (Transitional Provisions) regulations 2014 that provides for an overpayment of tax credits to be ‘treated as’ an overpayment of UC and so recovered from UC - so long as it is for the current tax year.

Arguably, because the mechanism is for it to be ‘treated as’ in this way (as opposed to making a tax credits overpayment straightforwardly recoverable from UC) then a claimant must also have a right to challenge via MR and appeal of the UC decision. And with the same rights to be properly notified by UC as if it were an overpayment of UC. And if that is the case, the claimant may not have been significantly disadvantaged in as much as neither tax credits nor UC have a right of appeal solely against recoverability.

And there is a discretion not to recover in UC - again, arguably, where it is an overpayment of tax credits ‘treated as’ an overpayment of UC, the COP26 guidance should apply - though it may require a challenge via JR to make that stick.’


Further thoughts would be much appreciated.

Mark Willis
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Hi Steven and Andrew

Sorry, I missed the original post, there was an update to handbook in Dec 2018 WRB267 which addressed this issue - it seems the legal power does now exist to recover old tax credit debts from UC.

TCA Section 28(1)(b) says it can be treated as if it were an amount recoverable by the SoS under s71ZB of the Social Security Administration Act. TCA Section 29 says notice must be given.

The Tax Credits (Exercise of Functions) Order 2014 No.3280 was made under s126 of the Welfare Reform Act 2012. The further effect of The Tax Credits (Exercise of Functions in relation to Northern Ireland and Notices for Recovery of Tax Credit Overpayments) Order 2017 SI No. 781 appears to rectify an omission that notice must be given.

There is also the amended version, as mentioned, of Section 28(1) under the UC (Transitional Provisions) Reg 12(3)(a)(ii) which specifies ‘treated as an overpayment of UC’ but this only applies to in-year overpayments when a claim for UC is made in the same tax year. However the other version appears to allow recovery from UC in other cases.

As for disputes, according to the statement in the Government response to the Committee of Public Accounts on the Twelfth to the Nineteenth reports from Session 2017-19 in March 2018 (page 12):

7.4 “When claimants move to UC, the Department sends them a summary of any outstanding debts, advising that these will be transferred to DWP. Debts are only transferred when they are not subject to ongoing disputes or appeals.”

https://www.parliament.uk/documents/commons-committees/public-accounts/Cm-9596-Treasury-Minutes-march-2018.pdf 

There is possibly another issue if the debt is from 2005, as under TCA s20(5), the revising decision that created the overpayment cannot be made more than five years after the end of the end of the tax year to which it relates, but I would guess HMRC would say the decisions were made at the time but recovery not pursued. Some debts were also written off from the early years of tax credits but difficult to prove if claimant was not notified of this.

Mark

Charles
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Mark Willis - 04 April 2019 04:26 PM

There is also the amended version, as mentioned, of Section 28(1) under the UC (Transitional Provisions) Reg 12(3)(a)(ii) which specifies ‘treated as an overpayment of UC’ but this only applies to in-year overpayments when a claim for UC is made in the same tax year.

Why only in-year overpayments? Yes, it only applies when a claim for UC was made in a tax year in which there was entitlement to TCs, but once that requirement is met, any TC overpayment should be recoverable as an overpayment of UC.

Mark Willis
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Thanks for the correction, Charles - overpayments following in-year move from tax credits to UC, rather than in-year overpayments.

Charles
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Seeing as they anyway have the power to recover from UC as you explained in your earlier post, what’s the point of the amendment made in the UC(TP) Regs? Is there any difference between recovery as an overpayment of UC or recovery directly through s71ZB?

Andrew Dutton
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Claimant has just sent me a copy of a TC1131(UC) letter from HMRC which sets out the overpayments - two from year ending April 2005 and one from year ending April 2011.

The letter refers to paying in full or having the sums taken back through deductions from UC: at no point does it refer to ability to dispute the amounts or what will happen if you do.

The claimant is quite sure that she has never been sent any TC overpayment letters before.

Andrew Dutton
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This guidance - https://www.gov.uk/government/publications/tax-credits-debt-in-universal-credit/tax-credits-debt-in-universal-credit—2  says at its last para:

‘11.6 What will happen if the claimant does not agree with their share of the debt showing on the letter ‘Your tax credits overpayments’ (TC1131)?
The letter will direct claimants to pages on GOV.UK, which include advice on where to go if they wish to dispute or query the amount of the debt.
The letter will contain a phone number in case they prefer to contact HMRC’

The TC1131 wording is here: https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/517232/annex-a-debt-technical-guide.pdf

It says only ‘For more information about tax credits overpayments go to https://www.gov.uk/tax-credits-overpayments

Meanwhile, on said page, there is no direct reference at all to what to do if you do not agree with the debt, it is all to do with making arrangements to pay. You can however find ‘disputes and appeals’ on ‘Related Content’.

I think this information should be part of the TC1131, not mentioned obliquely in passing.

Mark Willis
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Hi Andrew

As mentioned re old debts:

https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/89198/annual-report-accounts-1112.pdf

9.10 A key aspect of the tax credit Debt Strategy for 2011-12 was to address the older inactive debts that were
not in a Time-to-Pay arrangement. Earlier in the year, and following consultation with the NAO, we conducted
an extensive exercise to test how successful we might be in pursuing inactive debts and to identify the associated
costs. This resulted in a recommendation to remit all inactive debts over 3 years old. The exercise resulted in
remissions totalling £1.22 billion involving over 1 million aged and inactive overpayments.

The first bulk remission exercise was conducted in two parts and was in respect of historic and inactive debt.
Debts in excess of 3 years old that had no payments received within the preceding 12 months were in scope for
this exercise. The initial stage was carried out in September 2011 and captured cases from the Debt Management
and Banking (DMB) Integrated Debt Management System (IDMS). In total, 870,651 overpayments were remitted
totalling £1,051m. The second part was completed in March 2012 and captured debts that were ‘pending’ in the
National Tax Credit system, 162,178 overpayments were remitted totalling £164.7m;

The second bulk remission exercise was in respect of low affordability debts remaining from DMB Campaigns
2009 and 2010. The campaign process includes an auto remission exercise for certain categories of debt that
remain unpaid, and are not in a time to pay arrangement, following completion of the range of debt pursuit
activity. This was conducted in February 2012 and remitted 209,438 overpayments totalling £202.8m;

A further 1,711,376 cases with a total liability of £255.9m were also remitted/written-off as part of our
business as usual processing activity as they were deemed uncollectable.

p.58, 115, 116 HM Revenue & Customs Annual Report and Accounts 2011-12

Andrew Dutton
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Ooo, ta. Another string to the bow….


I still think the TC1131 is badly put together!